Draws In Global Inventories, Tightness Of The Crude Balance In Cushing

Last week, Kayrros reported a build in global inventories outside the US while EIA reported a draw in US commercial crude oil inventories.

Brent time spreads were volatile last week in the aftermath of the OPEC decision on June 22, the July announcement of the Saudi production increase, and the US demands to importers to halt imports of Iranian crude.

The WTI-Brent spread narrowed significantly last week in the prompt contract due to the tightness of the crude balance in Cushing. On top of the recent large draws in crude inventories, there is now a shortage of on-spec crude for WTI delivery at this location, exacerbating the tightness.

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Below is a recap of publications by Kayrros for the week ending June 29:

1. Global crude inventories and Brent time spreads stabilize

After narrowing by $0.6 per barrel in May, in line with the build in global inventories throughout the month, Brent 6m versus 2m time spreads are showing signs of stabilization in June.

The seasonal draws in US inventories were the main drivers of the global movement in June. Last week's draw added to the larger draw reported over the preceding 3 weeks.

Crude oil inventories outside the US stabilized in June. Kayrros measured a small build during the month compared to the much larger builds in May and April.

Adjusted for seasonality in the US, the May and April builds in global inventories increased. This is significantly larger than in the previous two years, partly due to the high levels of refinery maintenance.

As June shows signs of stabilization, with a global build over the month when accounting for seasonality in the US, it will be key to watch what happens in the coming weeks and going into Q3. A continuation of the build in crude inventories would be a signal that crude balances have loosened, while a return to flat or slightly drawing inventories would signal a return to normal crude balances.

2. Kayrros measured a global build in land crude oil inventories between June 18 and June 25.

Europe and MENA led the global movement with similar inventory builds. Rotterdam accounted for the bulk of the build in Europe, while Egypt, Turkey, and Libya were the main movers in MENA.

Inventories in China increased as well, offsetting the draw measured in Asia-Pacific and driven by Singapore and India.

In the Caribbean, the build measured in Curacao was offset by a draw in Aruba and further draws in the other locations in the region.

3. The 10-day and 30-day floating inventories increased between June 18 and June 25

The US Gulf accounted for the most significant relative stock change, as 10-day inventories increased.

The Middle East Gulf and China led the build in 30-day inventories with similar builds.

Floating inventories in Venezuela increased as well for the 10-day period and the 30-day period.

4. Kayrros measurements for US crude oil inventories reveal draws in the Gulf Coast and West Texas between June 17 and June 24

In the Gulf Coast, inventories in Clovelly (LOOP) and Ingleside decreased.

West Texas inventories also decreased marginally, with the most significant draw measured in Wichita Falls.

5. Total disruption increased on June 28, due to an outage at Syncrude's oil sands facility and more disrupted Libyan fields.

Recent fights at Libyan ports have caused significant oil supply disruptions in the country, leading to additional lost production compared to the previous week, despite the end of the fires at the Ras Lanuf storage site.

Kayrros estimates show that the country's disrupted production increased significantly as of June 28.

The announcement of the handover of east Libyan oil fields and ports to a parallel NOC also worried some countries, including the United States, France, Great Britain and Italy.

In Canada, Syncrude's oil facility outage has caused a major disruption in the country's output since last week.

In Iraq, despite the announcement by NOC that the Bai Hassan field resumed production on June 22, Kayrros satellite measurements showed low activity in the field.

Disruptions in Algeria decreased last week, while all the fields in Iran monitored by Kayrros show normal activity.